1. Field of the Invention
The subject invention relates to financial portfolio management, and more particularly, to a system and method for managing credit risk as it relates to fixed income securities and equities.
2. Background of the Related Art
Evaluating and managing credit risk is a critical aspect of portfolio management. The first step in examining credit risk is to accurately determine credit exposures, which may come from issuance, credit enhancement, contractual arrangements, counterparty relationships, etc. After identifying all of the exposures, the next step is to assess the individual credit worthiness of each identified entity versus the potential effect exposure to that entity might have on the expected yield/return. There are quantitative methods to determine the probability of default of each entity (e.g., methods employed in Moody's KMV's credit risk products such as EDF™ for determining the expected default frequency), but quantitative measures are ultimately supplemented with subjective evaluations and opinions of credit analysts and commentaries from market observers at the entity-level or industry/sector-level, or with regard to factors such as the capital structure, agency rating or market data.
It would be beneficial to provide a relational database containing subjective and objective information relating to credit entities underlying capital investment securities, and to provide a web-based system and method which enables a credit analyst to readily access the information in the database to evaluate the credit worthiness and risk associated with the above mentioned credit entities.
It is important to ensure that there are no unknown divergences between credit analysts and the portfolio manager's investment choices. Portfolio managers must be fully aware of the determinations made by credit analysts with regard to possible investments. Thus, it would also be beneficial to provide a web-based system and method that enables portfolio managers and credit analysts to readily communicate with one another to obtain credit approval for a credit entity in an effective and efficient manner.